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Bond Sales Soar to $17.3 Bln in Busy Friday

Verizon and Microsoft lead companies trying to issue debt prior to elections.

Microsoft Corp. and Verizon Communications Inc. are leading borrowers in the U.S. selling at least $17.3 billion of bonds in the busiest Friday this year as issuers stymied by Hurricane Sandy try to complete deals before the U.S. presidential election.

Microsoft, the world’s largest software maker, is selling $2.25 billion of securities in three parts and New York-based Verizon is raising $4.5 billion in its first bond sale this year, according to people familiar with the transactions. Sales exceed this year’s daily average of $6.1 billion and compare with $2.9 billion on Oct. 26, according to data compiled by Bloomberg.

Issuers rushed to market at the end of a week shortened by a virtual three-day hiatus amid the biggest Atlantic storm in history. As electricity and mass transit are gradually restored, issuers are looking to lock in record-low borrowing costs after today’s better-than-expected jobs report and before next week’s presidential elections, according to Jody Lurie at Janney Montgomery Scott LLC.

“This is a very one-time, unusual event,” Lurie, a Philadelphia-based corporate credit analyst, said in a telephone interview. The unemployment figures are giving borrowers “a green light to say, ‘OK, go time, don’t wait,”’ she said.

Yields on U.S. corporate bonds reached a record-low 3.58 percent on Oct. 19 before increasing to 3.62 percent yesterday, according to the Bank of America Merrill Lynch U.S. Corporate & High Yield Master index. The extra yield investors demand to own corporate bonds rather than government debentures rose to 231 basis points from 227 basis points on Oct. 26.

Microsoft, the manufacturer of the Windows operating system, may sell $600 million of five-year notes at a relative yield of 27 basis points, $750 million of 10-year securities at a spread of 47 basis points and $900 million of 30-year debt at 67 basis points as soon as today, according to a person familiar with the transaction who asked not to be identified because the terms are private. The Redmond, Washington-based company’s bonds may be rated Aaa, the highest level of investment grade, by Moody’s Investors Service.

Verizon, the second-largest U.S. phone company, is offering $1 billion of three-year notes at a spread of 32 basis points; $500 million of five-year debt at 42 basis points; $1.75 billion of 10-year securities at 75 basis points; and $1.25 billion of 30-year debt at 97 basis points, according to a person familiar with the transaction who asked not to be identified because the terms are private.

Verizon Issue

The company last issued debt in October 2011 and proceeds will be used to pay existing debt and for general corporate purposes, the person said.

Following the Oct. 29 storm, power had been restored to 4.6 million customers as of yesterday, or about 45 percent of those affected, according to the U.S. Energy Department. The outages pose “a real, serious threat” of disruption to voting on Nov. 6 in Nassau County, New York’s largest suburban jurisdiction, said William Biamonte, the county Democratic election commissioner.

In the last jobs report before next week’s election, a net 171,000 workers were added to payrolls in October after a 148,000 gain in September that was more than first estimated, Labor Department figures showed today in Washington. The increase exceeded the most optimistic forecast in a Bloomberg survey in which the median called for an advance of 125,000. The unemployment rate rose to 7.9 percent from 7.8 percent.

“Companies are trying to take advantage of the current low-rate environment, in case there is a shift in the yield curve after the elections,” Alan Shepard, an analyst at Madison, Wisconsin-based Madison Investment Holdings Inc., which oversees about $16 billion, wrote in an e-mail. For firms in need of financing, “they may be accelerating their funding to get it in now, in an environment that is known, rather than do the funding at a potentially higher cost in a more uncertain environment post-election,” he said.

Clear Channel Communications Inc. plans to issue $2.73 billion of 10-year debt through a unit of its Clear Channel Outdoor Holdings business to fund a tender offer for as much as $2.5 billion of shorter-term securities, the San Antonio-based company said today in a statement.

Clear Channel Worldwide, which manages advertising displays, will offer about $736 million of 10-year series A senior notes and about $2 billion of similar-maturity series B bonds. Pricing is set for Nov. 5, according to a person familiar with the transaction who asked not to be identified because the terms are private.

Aetna Inc., the third-biggest U.S. health insurer, may sell $2 billion of debt split into $500 million of five-year notes at a spread of 88 basis points, $1 billion of 10-year securities at 123 basis points and $500 million of 30-year debt at 133 basis points, according to a person familiar with the transaction who asked not to be identified because terms are private. Proceeds will be used to help finance the company’s purchase of Coventry Health Care Inc.

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